The news: On Tuesday, Meta CEO Mark Zuckerberg defended its purchase of virtual reality developer Within before a federal antitrust judge. He said that Meta was helping create the sector rather than attempting to control it and that Within was “not that critical” to the company’s goals.

Ahead of Zuckerberg’s testimony, CTO Andrew Bosworth wrote a blog post justifying the company’s commitment to VR, saying that “as new devices hit the market” the industry should “enter a new era of growth and competition” that will benefit users and developers alike.

Why it matters: The outcome of the case will decide whether the FTC will be granted an injunction to halt Meta's $400 million acquisition of Within, a small business that created the well-liked virtual reality fitness game Supernatural.

• The FTC contends that the acquisition of Within might eliminate competition in the nascent VR sector before that market becomes sizable.
• That’s a departure from previous standards, since antitrust legislation generally focuses on prohibiting acquisitions in established markets and mature industries.

Like other major ad-supported businesses, Meta experienced a significant uptick in sales during the pandemic lockdown when people stayed at home and were more obsessively connected to their devices.

The return to normal, plus the rise of TikTok and Apple’s 2021 privacy changes, have hit Meta particularly hard. The company recently laid off 13% of its workers.

Our take: The Within transaction is part of a larger play by Meta to establish itself as a dominant force in the rapidly developing metaverse industry. But investors have criticized Meta for pouring money into its Reality Labs business, which focuses on the metaverse, and encouraged Zuckerberg to take it easier as ad sales plummet.

• It’s becoming increasingly obvious that the company sees its VR and metaverse investments as critical to replacing lost social media advertising revenue.
• In an interview with Axios, Bosworth acknowledged that market conditions will influence how much money Meta can invest in VR.
• With AR and VR device shipments expected to grow nearly 7x in just four years, the FTC is betting that Meta is as prescient with its VR ambitions as it was when it acquired Instagram and WhatsApp.